Weekly Outlook: Economic Data & FOMC Meeting In Focus

Weekly Outlook: Economic Data & FOMC Meeting In Focus

13 Jun 2021 11:19 AM
 

Weekly Outlook 14-18th June 2021

USDINR: The rupee depreciated 0.1% this week, falling as low as 73.1250. The domestic currency saw a high of 72.73 and ended weaker at 73.0675. The dollar index and U.S. treasury yields fell after the larger-than-expected increase in U.S. consumer inflation data as market participants expected the inflation to be transitory.
On the economic calendar, it’s a quiet week ahead for rupee. The week starts with WPI inflation data due on Monday. On Tuesday, Trade deficit for the month of May and balance payment for Q1 is due. On the last trading day of the week, FX reserves data is due. It is not a busy week for U.S. currency as well. Core retail sales data, PPI and retail sales data is due on Tuesday. On Wednesday building permits and crude oil inventories data is due. The main focus for the pair this week will be FOMC meeting and interest rate decision scheduled later in the day. Investors will keenly look at the FOMC speech. On Thursday, initial jobless claims data will also be in focus. A higher than expected reading should be taken bearish for the dollar.

USDINR Tech: Rupee ended slightly lower this week. It slipped by 0.1% against the dollar. The pair traded range bound, ending the week at 73.0675. The momentum indicators are neutral signaling a further narrow range trading in the pair next week. If rupee appreciates, the support lies at 72.50 for the pair. Resistance levels lie at 73.46, which is where the 38.2% Fibonacci retracement level currently lies.
Importers can hedge their near term exposure around 73 levels with the help of forwards. Exporters can target 73.10+ levels to start hedging some of their exposures.

EURUSD: EURUSD ended the week on a lower note at 1.2106. The European Central Bank (ECB) announced its decision on monetary policy on Thursday and has left interest rates and assistance programs unchanged. The central bank has also upwardly revised its inflation and growth forecasts for this and the future years.
It is a busy week for the Euro in the economic calendar. The week starts with industrial production numbers for the month of April. On Tuesday, Eurozone trade balance and German CPI numbers are due. On Wednesday mid-night, investors will be eyeing on the US FOMC statement and interest rate decision, which would provide some direction to the market. Eurozone CPI numbers are due out on Thursday and CPI (YoY) is expected to increase from 1.6% to 2%. The week ends with German PPI which is expected to be slightly lower than last month.

EURUSD Tech: EURUSD has closed lower after rallying initially in the week. Momentum indicators are suggesting a bearish momentum in the pair, evident from a likely bearish crossover in MACD. The pair might fall towards its 20-week SMA of 1.2038, following which we might see a fall towards the psychological 1.2000 threshold. On the upside, the pair might face some resistance at 1.2265 after which we may see the pair moving towards 1.2300.

GBPUSD: GBPUSD traded in a range of 1.4070-1.4200 and ended the week lower at 1.4106. In the coming week, UK PM Johnson will hold a press conference to share his plan for the final stage of reopening the economy. A delay of 2-4 weeks can be expected in the plan because of the rising number of coronavirus cases in the UK.
It is a busy week for the sterling in the economic calendar. The week starts with Bank of England’s governor Bailey’s speech. On Tuesday, UK employment numbers are due. Unemployment rate is expected to decrease. There is another BoE Governor’s speech on Tuesday. On Wednesday, inflation data is due out. CPI YoY is expected to increase from 1.5% to 1.8%.Later in the day, US FOMC statement and interest rate decision is due out. Market participants will watch this very closely as this might give some direction to the pair. The week ends with retails sales figures and retail sales MoM is expected to decrease from 9.2% to 1.8%.

GBPUSD Tech: GBP/USD continued to trade in the broad range of 1.4070 - 1.4200. The pair has been consolidating for almost a month now and technical indicators are suggesting a continuation of this consolidation. Immediate support lies at 1.4085 which also coincides with its 33-day SMA followed by 1.4075 and 1.4000. The pair may face some resistance at 1.4190 before it breaks 1.4200 and tests 1.4250 again.

USD/JPY: USD/JPY traded in a broad range last week amid upbeat US economic data and weak growth projections for Japan. The pair has been benefitting from lower US Treasury yields as market participants continue to buy into Fed’s view of higher inflation being transitory. It is a busy week for Yen on the economic calendar. The week starts with Industrial production numbers for April followed by trade balance for the month of May. Exports are forecasted to rise by 51.3% compared to 38.0% previously and imports are forecasted to rise by 26.6% compared to 12.8% in April. YoY National CPI numbers for May are due out on Friday ahead of the BoJ monetary policy meeting. Inflation numbers might give an early indication of BoJ’s intent. The central bank is expected to keep its monetary policy unchanged although, they may take actions to counter the deflation, which might weigh on the yen. However, the key driver for the week will be the FOMC monetary policy meeting on 15-16 June. The Fed is expected to keep its policy and bond purchase program unchanged. Focus will be on the Fed’s economic projections. Upbeat economic projections may boost US Treasury yields and Dollar and lead to a weakening of Yen.

USD/JPY Tech: USD/JPY traded in a narrow range this week, closing 0.2% higher. The pair saw a high of 109.83 and ended the week close to the high at 109.65. In MACD analysis, there is a chance of bullish crossover, so we can expect further upside in the pair. The resistance lies at 111 levels which was last seen in the end of March month. On the downside immediate support lies at 109. However, if the pair breaks below 50 day SMA, then it may go towards 107.75 mark, which is where the 61.8% Fibonacci retracement level currently lies.